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      January 23, 2018

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How Your Auto Loan Can Be Affected By Your Credit Rating

Our lives are dominated by numbers. As students, grade-point averages were the numbers which ruled our lives. In the working world, the success or failure of any business is determined by the financial bottom line – are you in the red or the black? As individuals, numbers fill our lives, too. What is our bank account balance? What is the interest rate on our loans and credit cards? All of these numbers, when put together, can affect everything we do.

Take, for example, a very important number: credit rating.

A credit rating is part of your credit portfolio. Every financial decision a person has ever made, from their first credit card to their student loans, are part of the report. Any missed payments a person has ever had also are part of the report and can have a negative effect on any future financial dealings.

There are three credit reporting agencies in the United States: Equifax, Experian and TransUnion. These companies collect financial data on individuals, and then use a mathematical algorithm formula, developed by FICO, to generate a number between 300 and 850. A high, three-digit credit score indicates the person is of solid financial standing and is considered low-risk. Individuals who have credit ratings under 500 are considered high risk for loans and other financial dealings.

FICO also groups lenders together based on their overall financial history. Lenders who occasionally get behind on their bills are classified in a separate category from chronic late-payers. Prior to 2009, anyone who failed to pay on any loan – whether it was an occasional issue or a chronic one – was lumped together by FICO, creating an unfair credit rating for some individuals. With the changes, it helps those who have fallen behind a few times to still be able to achieve fair dealings with creditors.

However, for those chronic late payers, one of the areas which can be affected by a poor credit rating is an auto loan.

Unless you are lucky enough to have enough savings to pay cash for a vehicle – and most people do not – then chances are you will need to take out a loan to finance it. The new way FICO calculates its credit scores has a tremendous impact on the auto loan industry. People with only one major credit account in delinquency are likely to still have a good chance to get a fair interest rate on a loan. However, borrowers with a history of delinquent accounts will find themselves being either completely denied for a loan, or saddled with an extremely high interest rate.

A FICO score of 720-850 guarantees an annual percentage rate of no more than 6.3 percent, while those in the bottom tier of 500-589 can expect an interest rate as high as 18.5 percent. Borrowers whose credit score falls below 500 will likely be denied any kind of auto loan, even one with an extremely-high interest rate.

If you are in the market for an auto loan, the best course of action is to request your credit report and a copy of your credit score so you are aware of whether you may have difficulty in obtaining a loan. Individuals are permitted one free credit report from each of the three credit-reporting agencies annually. However, credit scores are not included and must be purchased separately.

LendingTree Reveals Which Used Car Brands Borrowers are Stretching the Most to Buy

... a percent of monthly income to determine which car brands consumers stretch their finances most to afford CHARLOTTE, N.C., Jan. 22, 2018 /PRNewswire/ -- LendingTree®, the nation's leading online loan marketplace, has released the findings of its ...

Published:  Mon, 22 Jan 2018 08:24:00 GMT



Race, not credit risk, determines auto finance, says report

Nationwide, auto loans represent the third highest category of consumer debt. And according to new research, the color of your skin has a lot to do with how much debt is incurred. "Discrimination in Auto Lending," authored and published by the National ...

Published:  Wed, 17 Jan 2018 15:51:00 GMT



BRIEF-Axis Auto Finance announces upsize of previously announced financing

* HAS AGREED TO SELL AN ADDITIONAL 7.3 MILLION SUBSCRIPTION RECEIPTS, ON PRIVATE PLACEMENT BASIS AT PRICE OF $0.70 PER SUBSCRIPTION RECEIPTS Source text for Eikon: Further company coverage: Our Standards:The Thomson Reuters Trust Principles.

Published:  Wed, 17 Jan 2018 22:44:00 GMT



Chase Auto Finance joins AutoFi retailing platform

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Published:  Wed, 17 Jan 2018 09:36:00 GMT



Are Auto Loans Confusing To Americans A New Survey Says Yes

There are many factors that go into buying and financing a new car. As a buyer, it's important to understand them all before deciding to sign on the dotted line, especially if doing so can impact your credit score. Used car marketplace Instamotor was ...

Published:  Thu, 11 Jan 2018 02:08:00 GMT



How Year-End Interest Rates Will Impact Home and Auto Loans

When Randy Stenhouse decided to buy a loaded Subaru Outback last month from Huebner Subaru in Carrollton, Ohio, he was motivated by his admitted love for the vehicle and by the offer of 0% interest rate financing for 63 months that was ending Dec. 31.

Published:  Thu, 18 Jan 2018 14:42:00 GMT



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